Acquisition Of Mineral And Leasehold Rights
Oil and gas investing begins with the investor determining what oil and gas stocks he should invest his hard earned cash into. While some will focus on oil and gas stocks which yield a better return on investment opportunities like oil sands stocks and Canadian oil stocks, we feel that you should begin by reviewing the next key three factors:
Is the Oil Stock Over valued? This is probably the very first question you should ask yourself as a great deal of oil stocks will be more hype than actual value. The best indicator of an oil stocks value is the oil stocks price earnings ratio. Should the price earnings ratio is greater than 20, we would suggest you further investigate why the oil stocks price earnings ratio is so high. If it really is as a result of an aggressive growth strategy including a recent land acquisition or perhaps a large drilling program which is to come about in the foreseeable future, attempt to determine the impact these events will have on the oil stocks earnings. In a whole lot of cases the future event's influence on the oil stock will not be exactly what the investment community forsees.
You can find a vital quantity of oil and gas stocks which have converted to become trust units. The main purpose of these oil stocks becoming trust units is to save and defer tax to unitholders. In contrast, the distributions that these oil stocks (trust units) pay out require an important quantity of cash flow and as a consequence reduce the growth capability of the specific oil stock. Therefore if you are looking for an oil stock that may give you steady cash flow than an oil stock which is a trust unit is your decision. Whereas if you would like to hold an oil stock in your portfolio which has a high growth potential you should keep away from oil stocks that are trust units. This is only because normal public company shares usually do not pay out large dividends to shareholders because they prefer to reinvest their hard earned cash in their capital program. Oil and gas capital programs include purchasing land, mineral rights, drilling programs etc., all of that are more likely to generate shareholder value rather than just paying these funds out to unitholders.
Investors should be aware what percent of their oil and gas stocks interest is in gas versus oil. This is important as if you buy a natural gas focused oil and gas company and also the price of gas will be at an all time high then this really is most likely not the period to buy. However this really is probably a good time for you to consider selling based on what commodity experts feel the price of natural gas will do within the years/months to come. The exact same goes for oil stocks, although it is our feeling that the cost of oil is much less volatile because it is doubtful the price of oil will be reduced by 50%. Whereas the cost of gas can certainly be reduced by 50% in a given year. In case you are planning on holding your oil and gas investment for a lengthy time frame then do not fret too much about the commodity prices as they should increase with inflation over a very long time period. In the event you are buying or selling oil and gas stocks for short time, then commodity prices become extremely important when you could make a significant return in a short time period.
It appears that everyone is either experiencing or knows someone whose experiencing financial difficulty. Many are have got the barter-trade route of Craigslist to provide the extras for their family and others have decided to lease rooms or sell items of property.
An often overlooked and lesser-known source of revenue is the option to sell oil and gas leases or possibly a Mineral and Leasehold Acquisition rights lease to generate income from deep-pocketed petroleum and mining companies with whom you can enter into "working interest" agreements. Many people decide to sell oil and gas leases on their own property being an easy way to generate extra income from land that they have already invested in. Working interests are beneficial to the property owner as the burden of exploration costs and mineral production or petroleum extraction are placed upon the company and not the individual. Individuals may choose to sell oil and gas leases to oil and gas exploration companies in exchange for a portion of the proceeds of the land on which exploration firms have agreed to invest in.
If you've ever driven down a highway and seen a lone pump jack, common in areas such as West Texas, then you have seen a land owner that has let his land to an oil company. In areas where oil isn't common or in mountainous areas where useful materials could possibly be located, a choice for many is to sell mineral rights to extract: copper, gold, quartz, topaz or amethyst, all of which are profitable commodities. Due to the high degree of geological diversity throughout the United States there is an excellent chance that regardless of where you own land you can sell oil and gas leases to working interests - effectively generating revenue with little to no initial investment. Some property owners have received payouts in the millions of dollars for a 100 acre oil rights lease!
With an increasing need for energy production domestically many land owners, especially in the Southern USA, choose to sell oil and gas leases. The standard royalty will be about 1/8th of the production - meaning that roughly one hundred and twenty five thousand dollars per $1,000,000 per working interest is generated for oil and gas royalty. This is quite the hefty profit for little-to-no upfront investment. Typically the exploration/extraction company shoulders the logistical burden of processing the site, which could require specialized equipment and expertise that is generally not possessed by the typical landowner.
If you own land it may be within your interest to consult with a mineral or oil and gas exploration service near you. You may even wish to contact and conduct your own geological survey. Lots of individuals aren't even aware of the composition of their land as well as for little-to-no cost you might find yourself literally sitting upon a gold mine. You never know. Your lifetime financial security could possibly be just around the corner.
